MUMBAI: Indian government bond yields are expected to trend higher on Monday, with investors exercising caution ahead of key global events this week including the U.S. presidential election.
The benchmark 10-year bond yield is likely to move between 6.84% and 6.88%, compared with the previous close of 6.8469% on Thursday, a trader with a private bank said. Indian debt markets were closed on Friday for a holiday.
“There is a very high amount of caution before the big event and the impact of the constant rise in U.S. yields would be felt across global yields, with India being no exception,” the trader said.
The U.S. presidential election is on Tuesday and investors have been putting on trade betting Republican candidate Donald Trump could be president again, although he is still neck and neck with Vice President Kamala Harris in several polls.
Trump’s policies on enacting higher tariffs on imports are likely to stoke inflation and put upward pressure on U.S. yields.
India bond yields seen little changed before key data
“While a Trump presidency will be more noisy and volatile, we feel Trump and Harris are mostly two peas of the same pod,” said Madhavi Arora, chief economist at Emkay Global Financial Services.
She said for Indian markets, the rupee and rates will be the first casualty. There will be a natural weakening bias for the rupee led by the Chinese yuan, while mild bear flattening may make a comeback for government bonds.
The 10-year U.S. yield was above the 4.30% mark in Asian hours, as investors fear U.S. fiscal trajectory is expected to worsen under a presidency by either Trump or Harris.
The elections would be followed by the Fed policy decisionby the end of this week, wherein a 25-basis-point rate cut is priced in by the market, and guidance and commentary would be crucial.
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